Common Prosperity INTERIOR CHINA and the COAST (PART 2)

DBW-6 1998 EAST ASIA Daniel Wright is an Institute Fellow studying ICWA the people and societies of inland China. LETTERS Common Prosperity INTERIOR CHINA AND THE COAST (PART 2) “Our policy is to allow certain groups of people and certain regions to prosper Since 1925 the Institute of first. The advanced regions are then obligated to bring along and assist the Current World Affairs (the Crane- backward regions. We must hold to the course of socialism: the goal is common Rogers foundation) has provided prosperity. But an equal pace of development is not possible. In the past we long-term fellowships to enable pursued egalitarianism and all ate out of iron rice bowls — this was actually com- outstanding young professionals mon backwardness, common poverty. We all lost out. First and foremost, reform to live outside the United States must do away with egalitarianism; we must smash the iron rice bowl.” and write about international areas and issues.An exempt —Deng Xiaoping (1986) operating foundation endowed by “Socialism is not when a small group of people become wealthy while most re- the late Charles R. Crane, the main poor. Socialism’s superiority is found in its pursuit of common prosperity Institute is also supported by — this is the embodiment of socialism’s most basic value. If, however, the rich contributions from like-minded and the poor become polarized, this is something very different. Conflict between individuals and foundations. ethnic minorities, between regions, between social classes, even between the 1 central government and localities could develop, possibly resulting in chaos.” TRUSTEES —Deng Xiaoping (1990) Bryn Barnard GUIZHOU, China March, 1998 Carole Beaulieu Evelyn Cohn Mr. Peter Bird Martin Richard Dudman Executive Director Peter Geithner Institute of Current World Affairs Thomas Hughes 4 West Wheelock Street William E. Knowland Hanover, NH 03755 USA Stephen Maly Mildred Marcy Dear Peter: Peter Bird Martin Paul A. Rahe My previous newsletter provided a first-hand account of a profound human Carol Rose drama: 50 million men and women flowing away from China’s less-than-prosperous John Spencer regions toward areas of opportunity. Desperation and the fear of poverty, combined Edmund H. Sutton with the lure of pockets of relative wealth, have persuaded a massive population Sally Wriggins within China — equal in size to the U.S. population west of the Rocky Mountains — to live and work under often-difficult conditions far from home and family. HONORARY TRUSTEES The spontaneity of this mass movement is striking, especially when one con- A. Doak Barnett siders that for the first 30 years after communist “liberation” (1949-1979) almost David Elliot every aspect of a person’s life was organized and controlled. Today, however, David Hapgood market forces are at work. So is the growth of personal freedom as millions cre- Pat M. Holt ate a spontaneous referendum on their country’s widening disparity — currently Edwin S. Munger surpassing pre-revolution levels — by voting with their feet. 2 Richard H. Nolte Albert Ravenholt The flip-side of migrant labor’s spontaneous response to their country’s Phillips Talbot 1 Huang Junru and Xie Hekuan, Xuexi Deng Xiaoping de fazhan lilun, (Deng Xiaoping’s The Institute of Current World Affairs Development Theory) (Guiyang: Guizhou People’s Press, 1996). THE CRANE-ROGERS FOUNDATION 2 The absolute per-capita GDP disparity gap between China’s richest and poorest regions 4 West Wheelock Street has steadily widened since 1949, especially since 1978. For example, the per-capita GDP Hanover, New Hampshire 03755 difference between Shanghai and Guizhou Province was 2,323 yuan in 1978; 3,437 in 1985; 5,024 in 1990; 10,468 in 1993; and 13,000 in 1994. unequal prosperity is a series of government policies, de- ever, it disturbed many leaders in China’s yet-to-prosper veloped during the 1990s, that attempts to assuage those regions. Not only did they feel Deng Xiaoping’s national who feel passed over by China’s economic miracle. form of trickle-down economics was not dripping quickly enough, Deng’s visit to Shenzhen — symbolic of This newsletter reports on the central government’s continued emphasis on coast-led development — indi- response to the disparity dilemma and the way those in cated no hope for a shift toward, or even equal treatment impoverished Guizhou Province view one of its policies: for, developing the interior. The reform period had sister-city relationships in which wealthy coastal cities brought unprecedented growth to the inland provinces have been directed by the central government to adopt in absolute terms — inland leaders knew that — but compared their backward, interior cousins. to the highly-favored coast, they were falling farther and farther behind. Coastal China’s high-growth takeoff had COMPLAINT left most of the less-prosperous interior choking in its fumes.3 In early 1992, Deng Xiaoping (88 years old at the time) Leaders from the interior began to express frustration made what will be remembered as one of his most skill- with not only their relatively smaller piece of a growing ful political maneuvers: he paid a visit to Shenzhen Spe- pie, but perhaps more importantly, a sense of injustice cial Economic Zone, bordering Hong Kong. One of four with biased government policy. Deng Xiaoping’s devel- “special economic zones” created in 1979 as an experi- opment strategy had created a playing field that leaned ment in market-oriented reform, Shenzhen — the sleepy hard to the east: special economic zones and other coastal fishing village turned high-tech and export dynamo — regions received preferential tax policies and foreign in- had become the jewel in Deng’s coast-led, development- vestment incentives, as well as lopsided central-govern- strategy crown. After inspecting some key factories in ment investment.4 To make matters worse, because Shenzhen, the elderly leader visited some other parts of interior regions had little formal representation in the Guangdong province and Shanghai. At each stop he central government, as coastal economic strength was in- called for the country to emulate Shenzhen’s economic creasingly parlayed into political capital, impoverished development by pushing ahead with rapid market-ori- interior regions had less and less voice in central-govern- ented reform. ment politics.5 Hu Angang, an influential economist at the Chinese Academy of Social Sciences, calls the politi- Known as the “southern tour,” Deng’s trip was stra- cal-resource bias “the root cause of the sharpened con- tegic because, just months before the 14th Party Congress tradictions between the central government and localities and [convened every five years to evaluate and determine policy between the developed and less-developed regions.”6 and leadership direction], it was an end-run around conserva- tive critics. As a trump-card played against retrenchment Complaint continued to percolate during the years policies in place since 1989, Deng’s outing mandated following Deng Xiaoping’s landmark trip to Shenzhen. In unequivocal support for continued reform and full-throttle 1994, economist Hu Angang gave voice to the growing economic growth. His designs were solidified during the 14th anxiety through two surveys: one with 30 provincial- Party Congress in late 1992, as evidenced by the creation of the level inland leaders, the other with 127 county-level gov- term “socialist market economy.” ernment officials from China’s interior.7 Approximately 90 percent of each group believed that regional disparity Deng Xiaoping’s high-profile “southern tour” had reached extreme proportions, violating socialism’s touched off explosive economic growth and got market- “common prosperity” principle. Sixty-three percent of oriented reform back on track. At the same time, how- the provincial-level leaders and 95 percent of those from 3 For example, between 1978 and 1993, coastal Guangdong province’s per-capita GNP grew from 390 yuan to 2,115 yuan. Guizhou’s per-capita GNP, however, grew only from 195 yuan to 592 yuan. 4 The ratio of per-capita government investment (total fixed-asset investment) strongly favored China’s richest regions. Between 1978 and 1995, for example, the distribution of per-capita investment in China’s coast increased 19 percentage points (from 45% to 64%), while it decreased 11 percentage points in central China and 7 percentage points in western China during the same period. Instead of government investment promoting and balancing development, it served only to exacerbate disparity. Between 1993 and 1995, the ratio of central-government funding for basic construction projects (e.g. transportation, power, telecommunications) increasingly moved in favor of the coast. In 1993, the ratio was 1.44 : 0.98 : 1.0 (coast: central: western); in 1995, the ratio shifted to 1.6 : 1.12 : 1.0 [source: Zhao Puping, Guanyu zhongxibu liyong waizi zhengci de jidian sikao (Points to consider regarding central and western china’s foreign investment policies), State Council Development Research Center Report, no. 59 (August 10, 1997)] 5 At the 14th Party Congress (1992) four provincial leaders from China’s high-income regions (Shanghai, Beijing, Tianjin and Guangdong) and one provincial leader from an upper-middle income region (Shandong) were recruited into the Politburo of the Party’s Central Committee. No provincial leader from the interior, low-income regions participated in the central-government elite. 6 Hu Angang, Zhongguo diqu chabie baogao (China regional disparity report) (Shenyang: Liaoning People’s Press, 1995), 82. 7 Ibid., 288. 2 DBW-6 “Maintain the basic line of the Communist Party for one hundred years.” This Shenzhen billboard celebrates Deng Xiaoping’s role as Shenzhen’s patriarch and creator of China’s coast-led economic miracle. The author, who took this photo, was in Shenzhen on the one-year anniversary of Deng Xiaoping’s death — February 19, 1998.

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